BB vs trading firms?
I'm wondering how S&T divisions within banks like GS, JPM, BofA, Citi etc. compare to trading firms like Getco, DRW, SIG, and Jane Street
Of course this is a very general question and it depends on many factors, but broadly which jobs are more rewarding (financially, enjoyability of career, career progression) etc.?
I talked to a guy that used to work at SIG for 2 years, and then now works at his own little shop. Apparently, the two are VERY different. From what he said, I gathered that:
Within S&T, it's highly routine and you generally go by the motions.
In prop trading firms, guys there are super, super quant - mainly just math/engineering guys. Although no one is asinine by nature, the job is very cut-throat because only the best remain. Job security is constantly challenged with how results-oriented it is.
In terms of enjoyability, he said that he would still take SIG > S&T divisions at any bank. Purely because of the intellectual stimulation - he said that although both fell under trading, guys at prop firms don't regard BB S&T as "true" trading. Overall, I feel like the 3 points you define "rewarding" by are decided on how confidant you are in your ability to succeed as a trader. At props, I assume you're paid very handsomely for out-performance, but the inverse is also true. On the other hand, because turnover seems to naturally be higher in props, I feel like S&T @ BBs would be more difficult to penetrate to begin with.
In a nutshel...S&T is your typical WSO well-rounded try-hard and Props are pseudo-MIT lifers who got 2400 on their SAT.
This is so generalized and over-exaggerated, I can't even.
Silly me
As an aside
SIG has a 3 year non-compete so this guy got laid off, fwiw
Yeah, I know he got laid off, he was transparent about that when he told me:P
From my experience (now almost 5 years old but still...), BB S&T interviews were much, much more focused on fit over quantitative aptitude. Going through interviews at IMC/Allston/Citadel/JS/DRW/Jump I can tell you that the interview process is much more quantitatively rigorous than any of the BBs and most of the other prop trading firms (Belvedere/Wolverine/Spot/Peak6). And, a bit off topic, the most rigorous interviews I've ever had overall were at relatively small quant hedge funds, not any of the prop shops.
Going back to the original question, I would tell you that the BB S&T style of trading is generally very, very different from prop shop trading. As euroazn mentioned, banks tend to trade a ton more OTC/exotic products and they usually commit to much larger positions. They also tend to trade much more based on client flow rather than some underlying thesis (this wasn't the case before but is becoming more of the norm with prop trading slowly "dying" on the sell side). As far as prop shops are concerned, most of them have a certain strategy that they excel in (listed index market making, equity volatility arbitrage, ETF creation/redemption, etc.) and they lever that strategy and attempt to capture as much market share as possible (or to realize an optimal sharpe ratio). Relatively few prop firms are able to exploit multiple inefficiencies with any true size and so they continue to specialize in only a single (or a few) areas.
Disagree, especially depending on the product. Risk is a lot more tapered compared to pre-crisis, but you have similar style risk limits at props as well.
Everything else is on point, imo.
Could you give some color on which shops are among the top in which strategies?
Silly me
I've interviewed for S&T and at trading firms.
S&T was the most fit based, a lot of behavioral questions and talking about markets and stuff. There wasn't any sort of mental math or brainteasers, except for one interview where I was accelerated straight to the head of a derivatives desk. That one was 100% quant, but not advanced math like you'd find at a JS interview. It was probability, market making, bets and some mental division with decimals.
The trading firms are way more quantitative obviously, but they also care a lot about fit. People assume that just because they recruit STEM kids that all the people there belong in a hackathon and haven't showered in weeks. Every trading firm I've interviewed has had a purely behavioral round and also an onsite where you meet/eat/drink with the traders.
Like the guy above said, you have to take math tests and such, but they're not hard, you just have to work fast. For that matter, none of the questions they ask are out of reach, if you're interviewing for an entry-level position, all of the math you're tested on can be covered in a probability/stochastics course and a combinatorics one, the rest is just arithmetic.
Also - I wouldn't say math ability is the sole determinant, at one of my onsites, the guy next to me absolutely flew through the math exam and was a strong math student at a top target (and you could Google his name and get hits), but he didn't do as well when we had to make markets with each other and be aggressive and confident with incoming information.
One thing I think is interesting is at the more algo/HF places, their exam styles were less math and more of speed pattern recondition. One of the tests that really challenged me was this one where you had a time limit for each question, and a countdown clock right above the question, and you had to do things like count the number of "j"s and "i"s in a block of text. You only had time to attack each question once, so you had to decide what to do quickly and immediately execute that.
None of this applies to the top tier ultra quant places like JS or HRT. Looking at the glassdoor for JS gives me a headache. Also the culture there is definitely more academic than the others from my minimal interactions with them.
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